Okay so if you're a high income earner. Let's say over $400-500K per year. You decide to buy property for let's say $120,000 CASH. $20,000 of that is land and $100,000 that you can depreciate
So you depreciate $100,000 over 27.5 years and you get to write off $3636 per year against your taxable income. Now, you save probably 39.6% of $3636 in taxes which is about $1440.
So let's say you sell the property after 27.5 yrs, then you gotta pay 25% recapture tax on that $100,000 you wrote off. That's $25,000 right there. That feels like a big punch compared to the $1440 you got to save for 27.5 years ( well considering you got to save 39.6% every year). What I am saying is that when you make $400-500K, that $1440 seems negligible amount but when you gotta pay $25,000 at the sale time, then not so much.
Plus the need to rent to have cash flow etc requires time and effort.
So is it worth paying cash? Remember you had $120,000 cash in the bank and you already paid taxes on it
Is real estate worth it or is stock market worth more since you're original money will not taxed again.?
Stocks will require research time and no other effort such as getting call from tenants.
Of course one advantage of real estate is Leverage but sometimes cash offers get a better deal.
So why is real estate considered superior to stocks by so many ? Thanks
So you depreciate $100,000 over 27.5 years and you get to write off $3636 per year against your taxable income. Now, you save probably 39.6% of $3636 in taxes which is about $1440.
So let's say you sell the property after 27.5 yrs, then you gotta pay 25% recapture tax on that $100,000 you wrote off. That's $25,000 right there. That feels like a big punch compared to the $1440 you got to save for 27.5 years ( well considering you got to save 39.6% every year). What I am saying is that when you make $400-500K, that $1440 seems negligible amount but when you gotta pay $25,000 at the sale time, then not so much.
Plus the need to rent to have cash flow etc requires time and effort.
So is it worth paying cash? Remember you had $120,000 cash in the bank and you already paid taxes on it
Is real estate worth it or is stock market worth more since you're original money will not taxed again.?
Stocks will require research time and no other effort such as getting call from tenants.
Of course one advantage of real estate is Leverage but sometimes cash offers get a better deal.
So why is real estate considered superior to stocks by so many ? Thanks
Comment